TIVE MERCATUS NITIA I
OSPERITY POLICY R P AL LOB G SERIES POLICY PRIMER NO .3
THE ROLE OF MEDIA AS A SUPPORTING INSTITUTION: IMPLICATIONS FOR DEVELOPMENT POLICY
CHRISTOPHER J. COYNE Fellow, Mercatus Center
JUNE 2005
MERCATUS CENTER
GEORGE MASON UNIVERSITY ABOUT CHRISTOPHER J. COYNE, AUTHOR
CHRISTOPHER COYNE is a Research Fellow at the Mercatus Center at George Mason University and an Assistant Professor of Economics at Hampden-Sydney College in Virginia. Chris holds a doctorate in economics from George Mason University. Prior to joining Mercatus, Chris worked at J.P. Morgan Chase in New York City. His current work focuses on the political economy of post-conflict reconstruction and the role that media plays in generating social change and economic development. An overview of his research is available at his personal website: www.ccoyne.com.
ABOUT FREDERIC SAUTET, SERIES EDITOR
FREDERIC SAUTET is a Senior Research Fellow at the Mercatus Center at George Mason University. Prior to joining Mercatus, Frederic was a Senior Economist at the New Zealand Commerce Commission and a Senior Analyst at the New Zealand Treasury where he focused on economic transformation, entrepreneur- ship, utility development and tax policy. Frederic holds a doctorate in economics from the Université de Paris Dauphine and did the course work for his doctorate at the Institut des Etudes Politiques in Paris. He also studied at New York University as a post-doc. Frederic’s current work focuses on entrepreneurship, institutions and social change.
For more information about the Mercatus Center’s Global Prosperity Initiative visit us online at
GEORGE MASON UNIVERSITY
THE ROLE OF MEDIA AS A SUPPORTING INSTITUTION: IMPLICATIONS FOR DEVELOPMENT POLICY
CHRISTOPHER J. COYNE
EXECUTIVE SUMMARY
Liberal democracies cannot thrive without a free and vibrant media. A free media gives voice to the cit- izenry, allows for peaceful debate, and improves government’s responsiveness to voter desires. In democ- racies, the presence of an independent media not only heightens voter awareness of important policy issues but also provides them with accurate information about the behavior of political agents. This enables voters to monitor politicians who are thus made more accountable to the public. For core eco- nomic and political institutions to be effective, a free media must support them.
The degree of private ownership and the ease for new entrants to establish themselves in the media indus- try influence the effectiveness of media in providing the feedback required to maintain core liberal dem- ocratic institutions, thereby enabling prosperity. As a general rule, the larger the share of private owner- ship and the freer the entry, the more effective the media industry will be in this role.
Many countries maintain barriers to private ownership ranging from an outright ban on private owner- ship of media outlets to intimidation of media employees, heavy regulation, and licensing. When such barriers exist, the effectiveness of media in promoting social, economic, and political change is con- strained. Where media is under the control of government, democracy is generally stifled and reforms are slow.
The ownership structure and role of media must be considered when formulating policy to promote eco- nomic and political development. Policymakers must work to ensure the opportunity for competition in the media industry. This can be achieved through policy that:
G Allows for private ownership and free entry;
G Creates an environment conducive to foreign direct investment;
G Enforces laws that protect journalists and allow for transparency.
For more information about the Mercatus Center’s Global Prosperity Initiative visit us online at
INTRODUCTION exchange of ideas. Where media is under govern- ment control, democracy is generally stifled and The discussion about how to best encourage eco- reforms are slow. nomic and political development throughout the world is increasingly focusing on the role of the This Policy Primer explains the role media plays media.1 Modern liberal democracies cannot exist in economic change and development, and pro- without a free media; indeed, every developed vides recommendations for policy makers consid- country in the Western world has a free media ering this issue. A free media is characterized by: and laws enforcing fundamental civic freedoms, G High levels of private ownership of media such as freedom of the press. outlets and complementary industries, combined with,
The institutions of property rights, freedom of G A stable economic and legal environment contract, and the rule of law are fundamental to that: (a) protects property rights and economic prosperity. A free media is an essential allows free entry in the media industry, (b) supporting institution that not only comple- fosters transparency, (c) protects ments, but also helps sustain the existence of the journalists from harassment, intimidation, core liberal democratic institutions. For and censorship and (d) protect public and instance, it is impossible to conceive of unbiased private individuals from harassment, free elections without media playing a consider- intimidation and slander by the media. able role. In addition to explaining the important role that Modern democracy rests on the flow of informa- media plays in achieving and maintaining a free tion generated by a free media. Media also and prosperous society, the various factors influ- extends civil society by giving a voice to the citi- encing the level of media freedom are discussed in zenry and allowing for peaceful debate and the detail.
1 For instance, the World Development Report 2002, Building Institutions for Markets, contained a chapter exploring the relationship between media and development. See especially chapter 10 which focuses on the role of media:
Policy Primer Mercatus Center at George Mason University 1 This Policy Primer is divided into three parts: protect journalists from harassment, (1) An overview of the role of media in intimidation, and censorship and to economic change and development with protect individuals from harassment an emphasis on the importance of private and intimidation by journalists. It versus public ownership of media outlets. also includes the creation and (2) An analysis of the various factors enforcement of transparency laws that that contribute to—or prohibit the allow media outlets to obtain relevant development and maintenance of—a free information related to political media. This section defines the institutions and political actors in a conditions which determine the ability of timely fashion. privately owned media outlets to operate D. Press councils are a viable option in effectively. developing countries where in the (3) Implications for development policy: absence of a strong legal A. The media industry must be environment, they can protect the characterized by high levels of private freedom of the press. These councils ownership in order for it to be an are independent and serve as a effective check or “watchdog” of watchdog group over the entire media political agents and institutions. In industry. They hear complaints this regard, private media requires ranging from harassment and more than just media outlets; it also intimidation, both by and against requires complementary industries journalists, to issues dealing with such as information technologies, integrity and ethics—such as delivery outlets and networks, etc. misreporting. These complaints, if B. Creating an environment conducive to foreign direct investment in the media industry is critical for its growth “The importance of a free media and development. This is especially for achieving and maintaining a true in developing countries that may lack the relevant management skills liberal democracy can be traced and know-how, as well as an adequate back to the American Revolution number of trained journalists. which relied on pamphlets for the C. Government has a key role to play in creating an environment in which a expression of ideas and motiva- free media can operate effectively. tions behind the Revolution.” This includes the creation of laws to
Mercatus Center at George Mason University Policy Primer 2 deemed to be accurate, are made public. The aim is to encourage “Perhaps the most important factor media responsibility and also to influencing the role of media in any protect media freedom. society is the ownership of media out- lets and the resulting structure of the A. MEDIA AND ECONOMIC DEVELOPMENT media industry.”
The importance of a free media for achieving and maintaining a liberal democracy can be traced The range of media outlets will continue to grow back to the American Revolution which relied as technologies advance, allowing for increased on pamphlets for the expression of ideas and duplication and reach at decreasing costs. For motivations behind the Revolution.2 Later, instance, technologies that allowed for mass Alexis de Tocqueville, in Democracy in America, physical duplication, such as the printing press, noted that newspapers are critical to civilization enabled the widespread dissemination of print and to a strong civic sphere separate from politi- media. Physical duplication was followed by the cal institutions.3 Newspapers kept citizens development of technologies associated with tel- informed about political activities and fostered evision and radio, allowing electronic duplication debate and the sharing of ideas. to reach an entirely new audience. Most recent- ly, the development of the World Wide Web and Of course, the nature of media has changed drasti- telecommunications technologies have created a cally since Tocqueville’s time. Media now includes new kind of interconnectedness, resulting in rel- many organized means of disseminating informa- atively cheap and fast information dissemination tion. This information can be factual, opinion, edi- to individuals around the world.4 torial, artistic, or some combination of these. The types of media available today are wide-ranging and Indeed, the Internet is completely changing the include, but are not limited to, newspapers, maga- media industry. Readership of physical news zines, cinema, radio, television, and the Internet. sources is decreasing as individuals turn to elec-
2 See Bernard Bailyn (1992) The Ideological Origins of the American Revolution. Massachusetts: The Belknap Press of Harvard University Press. 3 Alexis de Tocqueville. [1835-1840] (1988) Democracy in America. New York: Harper Perennial, p. 517. 4 For one example of this, see “The world through their eyes,” The Economist, February 26, 2005, p 23, which discuss- es the impact of satellite television on information dissemination in the Arab world.
Policy Primer Mercatus Center at George Mason University 3 tronic forms of media. Further, the evolution of media industry. weblogs and other decentralized sources of news
is reshaping the media landscape and redefining A1. MEDIA OWNERSHIP the boundaries of the media industry.5 As the There are two schools of thought8 regarding cost of the technologies and infrastructure media ownership: required to access electronic media sources con- tinues to fall, it will become easier for developing (1) State ownership: this school of thought countries to gain access.6 For instance, a recent holds that privately owned media outlets World Bank report indicated that 77% of the produce selective information and world’s population currently lives within the disseminate biased news reflecting the reach of a mobile network.7 interests of the private owners, therefore neglecting the interests of the public at Given the historical importance of media, and large. The logic behind state ownership what is sure to be its continued and increasing of media is that the state serves the importance in the future, it is critical for those public interest by disseminating accurate concerned with promoting sustainable economic and unbiased news to the general public. development to understand the role of media in (2) Private ownership: this is the exact this process. opposite of the state ownership approach. It contends that state-owned media Perhaps the most important factor influencing outlets will distort information to benefit the role of media in any society is the ownership incumbent political agents. These of media outlets and the resulting structure of the agents, preventing changes in the status
5 On the impact of the worldwide web on the media landscape, see “Yesterday’s papers,” The Economist, April 21, 2005, p 59, and “Newspaper Circulation Continues to Decline, Forcing Tough Decisions,” The Wall Street Journal, May 2, 2005, p. A1. Weblogs or “blogs” are revolutionizing the dissemination of information throughout the world. As an example, consider the case of Iran. Despite the fact that Iran’s media is largely controlled and censored by the government, there currently exist an estimated 100,000 weblogs. Iranians who utilize these blogs typically use pseu- donyms to criticize the government and discuss taboo topics. The government has attempted to crackdown on the use of webblogs for criticism by detaining and beating online critics. As a result of this harsh response on the part of the government, dozens of blogs have emerged that focus on evading government detection. See Time, “Blogwatch,” May 9, 2005, p. 20. 6 For a discussion of the role of telecommunications in developing countries see “The real digital divide,” and “Calling across the divide,” The Economist, March 12, 2005, p. 11 and 74 respectively. 7 World Bank report cited in “The real digital divide,” The Economist, March 12, 2005, p. 11. 8 Simon Djankov, Caralee McLiesh, Tatiana Nenova, and Andrei Shleifer (2003) “Who Owns the Media?” Journal of Law and Economics, 46, 2003, pp. 341-382.
Mercatus Center at George Mason University Policy Primer 4 quo that threaten their entrenched positions and authority, will abuse the “In countries where private own- media. The logic behind private ership is an option, ownership assumes that private owners there tends to be a variety of media will act in their own self-interest. Using this logic, one can also assume that products ranging public owners will act in the same from high quality dailies manner. However, private ownership to low quality tabloids.” brings discipline through competition, giving this approach an advantage. “privately owned” approach fosters competition. Unchecked public ownership will, in all likeli- While it is true that some private owners may bias hood, be biased in favor of those in power. An information in their favor, competition serves to environment that permits competition between provide a menu of different views allowing others media outlets, naturally disciplines the tendency to present unbiased information. for media to bias information in reporting. In a competitive media environment, as in other com- In the case of complete state ownership, legal petitive environments, while some outlets may competition is absent and the menu of media present biased information, others present alter- choices is reduced. If political agents bias infor- native views and interpretations. Media outlets mation to promote their self-interest there will be develop a reputation for providing a certain type no legal competition to offer a different or dis- and quality of reporting. In countries where pri- senting view. vate ownership is an option, there tends to be a variety of media products ranging from high qual- However, if legal competition is prohibited, there ity dailies to low quality tabloids. In the United is still the potential for black markets in informa- States, for instance, a consumer can choose tion and news. Indeed, there is often pressure between The Wall Street Journal and the National from media sources from other countries where Enquirer, with many options of quality and cover- media competition is allowed. age in between. For instance, this was the case with the develop- Both categories of media ownership assume that ment of Al-Jazeera in the Middle East. When owners are self-interested and will provide biased Qatar first gave permission to broadcast Al- news to the general public. The main difference Jazeera, it caused quite a stir in the Arab world, as between the two is that the “state owned” view it was against the law in many Arab states to requires a monopoly over the industry, while the watch “non-authorized” news. However, over
Policy Primer Mercatus Center at George Mason University 5 time satellite dishes popped up all over the and found 19,000 inaccessible at least part of the Middle East allowing individuals to access news time. These sites contained information on produced outside their home country.9 From cov- world news, events and politics.12 erage of the elections in Iraq and Palestine, to the assassination of former Lebanese Prime Minister Many countries have a mix of private ownership Rafiq Hariri, Al-Jazeera has been a major source with state intervention that falls between these of information dissemination throughout the two extremes. In these cases, there is some com- Arab world. Precisely because of its effectiveness bination of private ownership and state involve- in transmitting information, the network contin- ment in the media industry. For instance, even ues to meet resistance in many parts of the region. countries with a “free media” have certain regula- Iran, Saudi Arabia, Kuwait, Algeria, and Tunisia tions and licensing procedures that are imple- have all banned Al-Jazeera correspondents or the mented and controlled by the government. coverage rights of the news network.10 Further, it is possible that a country with private Another instance of state resistance to the spread ownership of media can still be influenced by the of free media is China. As the Internet contin- state through indirect influences such as subsidies ued to develop, China’s government persisted in and tax breaks, for example. passing regulations regarding what citizens can and cannot view. It has established what has Some countries have both private media owner- become known as the “Great Firewall of China,” ship and some state owned media sources. For which is meant to filter and block specific exter- example, the United Kingdom has a free press nal information.11 However, while it is possible to characterized by private ownership and the state- restrict some of the information circulating on run BBC media outlet. the World Wide Web, it is impossible to do it exhaustively. Zittrain and Edelman analyzed the In addition to the degree of private ownership in access to more than 204,000 Web sites in China the media industry, the opportunity for free entry
9 See “The world through their eyes,” The Economist, cited above. See also, Hugh Miles, Al-Jazeera The Inside Story of the Arab News Channel That Is Challenging the West. New York: Grove Press, 2005. 10 Robin Wright, “Al-Jazeera Puts Focus on Reform; Mideast Coverage by Network Reviled in Washington Is Boon for Bush,” The Washington Post, May 8, 2005, p. A16. 11 For more on the Internet in China, see Katherine Hartford, “Cyberspace with Chinese Characteristics,” Current History, September 2000 and William Foster and Seymour E. Goodman, The Diffusion of Internet in China, Center for International Security and Cooperation, Stanford University, November 2000. 12 Jonathan Zittrain and Benjamin Edelman, “Empirical Analysis of Internet Filtering in China,” Berkman Center for Internet & Society, Harvard Law School, 2002. Paper abstract available through:
Mercatus Center at George Mason University Policy Primer 6 and exit from the media market is of the utmost tant to understand the implications of these alter- importance. Free entry includes the ability to set natives on economic performance and progress. up new media outlets as well the freedom to con- The key issue becomes the level of private and tract with distributors and other complementary public ownership in the media industry and the industries. While many Western countries, such extent to which there is open access to the media as the UK, France, Spain, Italy, and Austria have market. Although the literature addressing the government-owned media outlets, they also have connection between media ownership and eco- few impediments to the establishment of new pri- nomic outcomes is still small, recent empirical vate media sources. This creates competition by research in the economic literature that considers removing the threat of government-owned as these competing claims supports a private media.14 well as private monopolies in the media industry Citizens in countries characterized by higher lev- and serves as a check on government-owned els of government ownership of the media are media outlets.13 poorer, die younger, have higher infant mortality rates and less access to sanitation. Further, in
A2. MEDIA AND PROSPERITY countries with higher levels of state ownership of Given the alternatives of state or private owner- the media, there is more corruption and less devel- ship, or some combination of the two, it is impor- oped capital markets. In stark contrast, where there are higher levels of private ownership in the media industry, the opposite is true.15 “Relatively higher levels of private media ownership allow Relatively higher levels of private media owner- ship allow for competition and the free flow of for competition and the free flow information from a variety of different sources. of information from a variety of This competition drives transparency in govern- different sources.” ment actions, which forces political actors to address the challenges that the country faces and
13 However, free entry and private ownership of radio and television outlets is a recent phenomenon in many Western European countries. As late as the 1970s, France and Spain, for instance, had government-owned monopolies in the radio and television industries. 14 See Djankov et al. (2003); Timothy J. Besley and Robin Burgess (2002) “The Political Economy of Government Responsiveness: Theory and Evidence from India,” Quarterly Journal of Economics, 117, pp. 1415-1452 and Timothy J. Besley and Andrea Prat (2002) “Handcuffs for the Grabbing Hand? Media, Capture and Government Accountability”, London School of Economics, Mimeo. 15 See Djankov et al. (2003).
Policy Primer Mercatus Center at George Mason University 7 that of Poland. With the fall of Communism in “...the opportunity for free entry and 1989, Poland replaced its state run media with a exit from the media market is of the simple licensing program. A private media indus- try soon developed. Moreover, the constitution utmost importance. (Articles 14, 54, and 213) bans censorship and Free entry includes the ability to set up guarantees freedom of the press. new media outlets as well the freedom to contract with dis- One of the two major newspapers, the tributors and other Rzeczpospolita, played a key role in the transition. complementary industries.” The paper expanded its political and economic coverage and created the “green pages” which specifically focused on Poland’s economic devel- to be accountable for the choices they make. For opment, in terms of the policies adopted and the instance, Amartya Sen has argued that the progress of those policies. The paper serves as an absence of democracy, an independent media, information source on mass privatization, and freedom of information were all major con- enabling readers to realize the benefits and track tributing factors to almost thirty million deaths the progress of political efforts.17 during China’s Great Leap Forward between 1958 and 1961. He juxtaposes this with India, which In other words, the media in Poland has increased has not experienced widespread famine since its the transparency of reforms and political activi- independence. Sen argues that this is, at least ties, lowering the cost of monitoring and under- partially, due to a free press that makes the threat standing the activities of the government for cit- of a famine common knowledge to citizens and izens and civil society in general. forces politicians to address the challenge.16
A3. MEDIA AND CORRUPTION Consider the case of an economy in transition— A free media also has significant impact on the
16 Amartya Sen (1984) Poverty and Famines, Oxford: Oxford University Press. See also Sen (1999) Development as Freedom, New York: Alfred A. Knopf Inc. 17 Tim Carrington and Mark Nelson (2002) “Media in Transition: The Hegemony of Economics,” in A. Clapp-Itnyre, R. Islam and C. McLiesh (eds.), The Right to Tell: The Role of Media in Economic Development. Washington D.C.: The World Bank, pp. 225-248.
Mercatus Center at George Mason University Policy Primer 8 effectiveness of policy reforms. Where the media their pockets—higher than judges, mayors, or leg- is free, it improves government’s responsiveness islators. Incidentally, as the article notes, it was to voter wants.18 In democracies, the presence of ultimately the press that exposed this corruption an independent media not only heightens voter and put an end to one of the most sophisticated awareness of important policy issues, but also pro- bribery operations ever discovered. vides accurate information about the behavior of political agents, enabling voters to monitor politi- In general, a free media serves a critical watchdog cians who are thus made more accountable to the function, making it more likely that political public. agents will act in a transparent and accountable way. An institutional structure that allows for As an example, consider the study by John private media ownership is therefore one key McMillan and Pablo Zoido of corruption in Peru component to achieving and maintaining liberal and specifically that by secret-police chief democratic institutions. Vladimiro Montesinos. McMillan and Zoido analyze the amount of bribe money Montesinos As corruption continues to take the center-stage paid to opposition parties, the judiciary, and the in development policy discussions, the role of press, and they determine that payments to the media becomes all the more important.20 press were 100 times what were paid to politicians and parties. “Citizens in countries characterized The authors conclude that by revealed prefer- by higher levels of government ence, via bribe payment, the free press was the ownership of the media are poorer, strongest check on corruption in Peru.19 In other words, politicians who wanted to ensure that die younger, have higher infant mortality their crooked-ways where not made public, rates and less access to sanitation.” placed the highest value on keeping the media in
18 Christopher J. Coyne and Peter T. Leeson (2004) “Read All About It! Understanding the Role of Media in Economic Development” Kyklos 57, pp. 21-44. John Mueller (1992) “Democracy and Ralph’s Pretty Good Grocery: Elections, Equality, and the Minimal Human Being,” American Journal of Political Science, 36, pp. 983-1003. See also Sen (1984, 1999), Besley and Burgess (2002) and Besley and Prat (2002). 19 John McMillan and Pablo Zoido (2004) “How to Subvert Democracy: Montesinos in Peru,” Journal of Economic Perspectives, 18(4), pp. 69-92. 20 The Millennium Challenge Corporation criteria for allocating funds are based on country’s overall performance in relation to three broad policy categories: Ruling Justly, Encouraging Economic Freedom, and Investing in People. Low corruption is the only absolute condition in the selection criteria. See the MCC’s website:
Policy Primer Mercatus Center at George Mason University 9 A4. SELF-SUSTAINING INSTITUTIONS A free media is a necessary but not a sufficient “Where the media is free, condition for successful economic development. it improves government’s A free media is correlated with economic devel- opment and the world’s most developed responsiveness to voter wants.” economies all have a free media.21 However, one does observe countries that have a free media but the various factors that influence the operation of remain relatively poor such as Costa Rica, Benin, media outlets is key to understanding their ulti- Fiji, and others. There are clearly other factors mate success or failure in contributing to the outside the media industry—political, economic establishment and maintenance of a liberal and and legal stability, education, ideology, etc.—that prosperous society. play a role in generating economic progress. The institutions of property rights, freedom of In fact, a free media can be both a consequence contract, and the rule of law are fundamental to and a source of reform. The initial development economic prosperity. What is often overlooked is of a free media requires the preexistence of certain that in order for these core institutions to exist fundamental institutions. For instance, some and be sustained over time, a free media is vital. basic notion of property rights is required for pri- In other words, a free media plays a vital support- vate ownership of media outlets. However, once ing role which not only complements but also in place, a free media can serve to re-enforce exist- helps sustain the existence of the core liberal ing institutions and contribute to further change. democratic institutions.
In the case of Poland, discussed above, reforms B. CONDITIONS CONDUCIVE that allowed for the initial development and pro- TO A SOCIALLY PRODUCTIVE tection of freedom of the press were critical in MEDIA ENVIRONMENT establishing private and free media outlets. Once established, these media outlets further con- This section considers some of the major factors tributed to the reform process by increasing trans- that determine the effectiveness of the private parency around subsequent reform efforts. Given media as a mechanism for economic, political, that media is one key ingredient, understanding and social change.22 The factors considered are
21 See Djankov et al. (2003). 22 For a more detailed analysis of each of these factors see Coyne and Leeson (2004).
Mercatus Center at George Mason University Policy Primer 10 not meant to be an exhaustive list, but rather a the demands of political agents who can few of the key determinants that allow or prevent grant them favors. media from contributing to the development process. (2) General economic environment: the general economic policies undertaken by
B1. MEDIA AUTONOMY governments affect the ability of media The ability of privately owned media sources to firms to operate effectively. Media act without government interference is critical in outlets will face the same negative their role as mechanisms for change. One can economic situation that other businesses envision three main influences on the independ- face in developing countries, which can ence of media sources: potentially include an unstable monetary system, poorly defined and enforced (1) Market forces: as long as media sources property rights, excessive corruption and are privately owned and do not rely on regulation, and more. government for financial support, they will be subject to the market forces of The potential problem here is that a profit and loss. Outlets that are able to vicious cycle may result where the meet consumer demands will earn a financial and economic situation is so profit and those that fail to do so will bleak that media outlets turn to the incur a loss. A government that is government for assistance. Doing so actively intervening in specific industries limits their independence as they through excessive regulation or subsidies become increasingly influenced by and will prevent the market from operating dependent on government. effectively. Instead of allocating resources to meet consumer needs, media The general economic environment will outlets will allocate resources to meeting also influence the level of foreign direct investment that is critical for the development of both the media industry “…a free media serves as well as complementary industries. For a critical watchdog function, instance, a country characterized by a high risk of expropriation attracts less making it more likely that political foreign direct investment; investors lack agents will act in a transparent confidence that their investment will be and accountable way.” protected. This can cause media to turn to the state for financial support and thus
Policy Primer Mercatus Center at George Mason University 11 the vicious cycle begins. structure of the media industry or complementary industries. Examples (3) Political pressures: they can be direct or here include raising the barriers to entry indirect. Direct political pressures occur so that government agents can control when those in positions of political power which outlets are legally allowed to influence the media industry through provide news to the populace. Another direct contact. Forgiving debt or taxes example of indirect pressure is state for certain types of news coverage is a control of the distribution mechanisms common example of direct pressure. A and materials that are used in the more extreme, though not uncommon, production process, such as paper for example would be the payment of bribes newspapers. Both types of political directly to media outlets to bias news in a influence distort the ability of media certain direction.23 Direct pressure sources to report accurate and complete influences the type of news covered and information to the populace. the information conveyed to the
populace. B2. LEGAL STRUCTURE This factor focuses on the laws related to the Indirect political pressure occurs when availability of information and the ability of political actors exert influence on the media outlets to use that information. Of the utmost importance are the laws that apply to pri- vate individuals and media firms as well as those “…a free media plays a vital that apply to the government regarding trans- parency and the protection of journalists and supporting role which not only media outlet employees. complements but also helps sustain the existence of the core liberal Transparency in the public sector requires that information about the government be available democratic institutions.” to the media.24 Furthermore, media outlets must
23 See for instance McMillan and Zoido’s study of corruption in Peru cited above. 24 As one example of this, consider the Freedom of Information Act in the United States which requires federal agen- cies to disclose records requested in writing (statute 5 U.S.C. § 552). It should be noted that federal agencies can withhold information pursuant to certain exemptions and exclusions.
Mercatus Center at George Mason University Policy Primer 12 have the freedom to utilize this information as ment believes those sources were involved in, or long as they act within existing laws which pro- have information about, criminal activities. If tect the rights of others. In other words, freedom the subpoenaed journalist refuses to divulge the of speech laws must be enforced to protect jour- source he can legally be put in jail. Despite the nalists from lawsuits, physical violence, harass- fact that this is currently legal, one could make ment, and censorship. At the same time, laws the argument that this constitutes a form of must exist that protect individuals from harass- intimidation. ment and intimidation by journalists and media outlets. B3. QUALITY OF MEDIA Assuming that media autonomy and a stable legal In most countries some laws exist that hold media system allowing for reasonable access and dissem- outlets responsible for what they report. For ination of information are present, another key instance, in the United States, libel and slander factor is the quality of the media. laws exist. Moreover, although rarely evoked, there is an exception in U.S. law that media may Openness and availability of information fosters be required to limit what is reported in cases of an environment of competition between media national security risk. There is a fine line outlets to obtain and report on information in a between these two sets of constraints. On the timely and accurate manner. There is an inher- one hand, in order to be effective, media outlets ent check in such an environment because infor- must have the right to obtain and utilize informa- mation is readily available and verifiable by other tion without being harassed by public officials. media outlets. As such, those that misrepresent On the other hand, rules must be established so facts will be eventually weeded out and overall that journalists and media outlets do not harass media quality will increase. private and public individuals. Finding the bal- ance between the two sets of constraints and In developing countries, it is often difficult to find ensuring that there is no abuse in either direction well-trained employees to staff media outlets. can be a difficult task. It will often be a fine line This difficulty ranges from business management whether a certain law results in intimidation. of the firm to journalists lacking the relevant skill set of how to interpret and report information. To illustrate the difficulty in striking the right Even with autonomy and a favorable legal struc- balance, consider that in U.S. law there is no ture, an inability to accurately report and gather such thing as “reporter’s privilege.” What this information will hinder the ability of media to means is that government prosecutors can sub- effectively generate reforms and social change. poena journalists and request them to disclose confidential sources of information if the govern- One way of overcoming this problem is opening
Policy Primer Mercatus Center at George Mason University 13 development community. “Democracy and peaceful These policy recommendations are outlined societal order below along with questions policy makers can use will not long succeed to guide an evaluation of a country’s media.
without a free media.” C1. INCREASE THE LEVEL OF PRIVATE OWNER-
SHIP IN THE MEDIA INDUSTRY AND ALLOW FREE
ENTRY IN THE MEDIA MARKET the media market to external influences through Countries concerned about enabling a function- foreign direct investment and the hiring of for- ing media should take steps to increase the level of eign employees. This enables developing coun- private ownership in the media industry. As dis- tries to import foreign media resources. These cussed above, every developed country has a free external resources can overcome the problems media characterized by high levels of private own- mentioned above on several levels. For one, for- ership. Private ownership does not just refer to eign direct investment can aid in overcoming media outlets but also complementary industries. management problems. Foreign managers, jour- These industries include distribution companies, nalists, editors and researchers will bring their paper manufacturers, and more. The aim is to skills set with them to the developing country. remove the possibility of both direct and indirect This also creates the possibility for untrained cit- political pressures on the media industry. In addi- izens to learn from their more experienced coun- tion, policy should aim at allowing free entry in terparts on the job, thus building local media the media market. This reduces the risk of giving capabilities. government-owned and private incumbents monopolistic positions, and it promotes quality. C. IMPLICATIONS FOR DEVELOPMENT POLICY Countries with higher levels of private ownership and free entry have greater wealth, less corrup- Media is a supporting institution, crucial to the tion and relatively developed capital markets. core institutions that make up liberal democracy Removing the possibility of state ownership of and a market economy. Democracy and peaceful media and complementary industries will insulate societal order will not long succeed without a free these industries from political influence and will media. Many factors influence the media indus- foster an environment of competition. try and its subsequent impact on economic, social, and political change. The analysis put The key questions that policy makers should ask forth here has important implications for the when evaluating media in a developing country
Mercatus Center at George Mason University Policy Primer 14
and assessing potential policy interventions these countries do not have the skill set and include: experience necessary to put forth a media prod-
G Are there state owned media outlets? Has uct that fulfills all of the roles outlined in this state ownership increased or decreased on primer. a year-on-year basis? What is the level of state ownership relative to private Allowing foreign investment is one key way of ownership in the media industry? overcoming this problem. Foreign ownership per-
G Are complementary industries owned by mits foreigners with the appropriate skills to oper- the state? Has state influence in these ate in the developing country, provides a readily industries increased or decreased on a apparent example of how to produce a quality year-on-year basis? product, and in this manner, foreign direct invest-
G Does the state influence the media and ment in the media industry can strengthen its complementary industries through independence. Attracting foreign direct invest- subsidies, debt relief, tax relief, etc.? ment requires an environment characterized by
G Are there barriers to entry that prevent judicial, regulatory, and monetary stability as well competition and grant monopoly privilege as relatively well-defined and enforceable proper- to certain media outlets? ty rights.
G Do media outlets have to obtain licenses from the state in order to operate? If so, The key questions for policy makers include:
are licenses used to censor media outlets? G Are there barriers to foreign investment in What does the licensing process include the media industry?
(number of steps, monetary costs, bribery, G What is the risk of expropriation faced by renewal costs and timing, etc.)? foreign investors?25
G Has foreign investment in the media
C2. ALLOW FOR FOREIGN DIRECT INVESTMENT industry increased or decreased over time?
IN THE MEDIA INDUSTRY G Are there barriers to importing technology The quality of the media can be a major issue in and infrastructure that support media developing countries. Often, individuals in outlets?26
25 Two sources of information regarding the risk of expropriation and the broader quality of institutions are the International Country Risk Guide (ICRG) and Business Environment Risk Intelligence (BERI). 26 A good source of information on the general economic environment of a country and its impact on the media indus- try is Freedom House’s annual Freedom of the Press: A Global Survey of Media Independence cited above. For each coun- try Freedom House assigns an “economic environment” score which includes: concentration of ownership, costs of establishing media outlets, costs of production and distribution, the impact of the state on advertising, the existence of subsidies and the extent to which a country’s economic situation impact the development of the media industry.
Policy Primer Mercatus Center at George Mason University 15 C3. ESTABLISH LAWS FOSTERING TRANSPAREN- ing the relevant legal structure for the media
CY AND PROTECTING JOURNALISTS, MEDIA industry include:
OUTLETS, AND PRIVATE AND PUBLIC G Do freedom of information laws exist? If
INDIVIDUALS so, are they enforced? Are members of the A key factor in determining the effectiveness of press and general public actually able to media is their ability to obtain information relat- obtain documents that are covered by such ed to government operations. Laws should be laws?
established that allow media outlets to obtain G Do laws exist to protect private and public information in a timely fashion and report that individuals from harassment and information without repercussions. Laws must intimidation by the media? If so, how also exist that protect journalists from harass- often are they used to threaten journalists ment and intimidation from public officials as and media outlets to prevent the well as laws that protect private and public indi- dissemination of information?
viduals from harassment and intimidation from G Do journalists need to be licensed? If so, the media. Such laws increase transparency and what factors determine if a journalist is allow media outlets to accurately report informa- qualified? Is the licensing process used to tion to the public. censor certain journalists? Do licensed journalists ever have their license revoked The key questions for policy makers in determin- as punishment for reporting certain information?27
“Countries with higher levels C4. CONSIDER THE POSSIBILITY OF ESTABLISH- of private ownership have greater ING INDEPENDENT PRESS COUNCILS In developing countries with little or no experi- wealth, less corruption and ence with liberal political, economic, and social relatively developed institutions, establishing a free and vibrant press can be difficult. In many cases, these countries capital markets.” lack a stable and strong legal system that protects
27 Freedom House’s annual, Freedom of the Press: A Global Survey of Media Independence, also serves as a good source of information on a country’s legal environment as it relates to the media industry. For each country Freedom House assigns a “legal environment” score. The score is determined by an examination and analysis of the laws and regu- lations that influence the content of media and the use of these laws by government to restrict the media’s opera- tion. The International Press Institute
Mercatus Center at George Mason University Policy Primer 16 freedom of speech and press. Moreover, laws that political agents, and also the integrity of media establish what media can and cannot do are often outlets themselves. The aim of press council absent. In such cases, the critical issue is establish- activities is to encourage responsibility on the ing the best means of providing a guarantee of a part of media outlets and protect media freedoms free media, and the protection of the rights of indi- by enforcing a code of conduct and set of stan- viduals from media harassment and intimidation. dards.28
One viable alternative available to policy makers CONCLUSION is to establish independent press councils. These councils receive complaints about harassment, Private ownership of media outlets is a powerful false or misreported information, and publicly means of ensuring that the institution of media report on such issues. Press councils are inde- plays a supporting role for other democratic and pendent bodies, which are designed to be outside market-oriented institutions. Indeed, a free media the control of any one political interest. Funding is the most important supporting institution a free for press councils can come from a number of and prosperous society can employ to ensure sources including membership fees and donations sound economic and political governance. Media from non-profit organizations. The members of clearly plays a role in the dissemination of infor- the council should be well-recognized as non-par- mation throughout society. As such, it can be tisan and fair. seen as a key mechanism for economic, political and social change. In this regard, media operates Press councils have no legal powers but instead on several key margins ranging from legitimizing serve a governance function, monitoring the reforms and political events to increasing trans- media industry. This monitoring includes such parency which ultimately makes political actors things as interactions between media outlets and more accountable for their actions.
28 To illustrate this point, consider the case of Australia where press freedom is not guaranteed by constitutional means but rather exists via convention. In the absence of constitutional guarantees, a large part of the sustainabil- ity of the free press stems from the Australian Press Council (available at:
Policy Primer Mercatus Center at George Mason University 17 There are a number of factors that influence the (3) Establish laws fostering transparency and effectiveness of a free media in contributing to protecting journalists and media outlets; the development and maintenance of a free and (4) Consider the possibility of establishing prosperous society. We considered three general independent press councils. factors: media autonomy, legal structure, and quality of media. As developments in technology continue, news and information will become available to an Policy makers concerned with enabling effective increasing number of people throughout the world. political and economic institutions must pay Ensuring access to a wide range of free and compet- attention to the state of the media industry in itive media sources is critical to spreading liberal society. A special effort should be taken to: democratic institutions and fostering economic (1) Increase the level of privately-owned prosperity. As such, the topic of media freedom media as much as possible and allow free will continue to be an important one for the devel- entry in the media market; opment community. Only by understanding the (2) Allow for foreign direct investment in critical role of a free media in the development the media industry; process will efforts in this area be successful.
Mercatus Center at George Mason University Policy Primer 18 ABOUT MERCATUS
The Mercatus Center at George Mason University is a research, education, and outreach organization that works with scholars, policy experts, and government officials to connect academic learning and real world practice.
The mission of Mercatus is to promote sound interdisciplinary research and application in the humane sciences that integrates theory and practice to produce solutions that advance in a sustainable way a free, prosperous, and civil society. Mercatus’s research and outreach programs, Capitol Hill Campus, Government Accountability Project, Regulatory Studies Program, Social Change Project and Global Prosperity Initiative, support this mission.
Mercatus is a 501(c)(3) tax-exempt organization. ABOUT THE MERCATUS POLICY SERIES The objective of the Mercatus Policy Series is to help policy makers and those involved in the policy process make more effective decisions by incorporating insights from sound interdisciplinary research. By comple- menting the standard empirical approaches with on the ground and in depth field work conducted by Mercatus scholars, the Series is designed to provide an analysis rooted in the local institutional context in which entrepreneurs and economic actors make decisions.
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G POLICY PRIMERS present an accessible explanation of fundamental economic ideas necessary to the practice of sound policy;
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